We set up a two-stage game with sequential moves by one altruistic agent andn selfish agents. The rotten kid theorem states that the altruist can only reach her firstbest when the selfish agents move before the altruist. The Samaritan’s dilemma, on theother hand, states that the altruist can...

We study environmental policy for a polluting firmthat can invest in extracapacity. The optimal levels of allowed output as well as the tax rate are increasingin investment. With divisible investment, commitment always leads to the first best,under direct regulation and taxation. Time-consistent...